Kerosene, LPG prices to be raised every month
The government decided to increase retail prices of subsidised cooking gas and kerosene on a monthly basis.
In a policy change that has been slipped in quietly, the price of kerosene sold through the public distribution system and domestic LPG cylinders would be increased every month. Kerosene price has been raised by 25 paise from August 1 and that of LPG by ~1.93 a cylinder, to narrow losses from selling below market price.
In July 2016, kerosene price was increased by 25 paise for the first time in five years. Domestic LPG price was also raised last month by ~1.98 a cylinder. The current increase is part of an overall strategy by the government to cut the subsidy burden. In the case of kerosene, it also wants to prevent diversion of subsidised cooking fuel for adulterating diesel. Last month, oil companies were permitted to increase kerosene price by 25 paise every month till April 2017.
In the case of PDS kerosene, underrecoveries for August 2016 will be ~11.49 a litre, against ~13.12 a litre in July. In Delhi, oil companies get ~14.96 a litre for subsidised kerosene.
While petrol and diesel are sold through retail majors like Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation, kerosene is sold through the PDS. According to the Petroleum Planning and Analysis Cell, the subsidy on kerosene has dropped 52 per cent from ~27.93 a litre in 201415 to ~13.47 a litre in 2015-16.
The phased increase of prices is being done to sell the fuel at international prices. Currently, subsidy is transferred directly to people below the poverty line on a pilot basis in 26 districts across eight states. Kerosene accounted for 42 per cent of the total petroleum subsidy in 2015-16. The underrecoveries for all petroleum products in 2015-16 was ~27,571 crore, while the figure was ~76,285 crore for 2014-15.
On the other hand, the cash compensation on domestic LPG for August will be ~33.93, while compensation by oil marketing companies will be ~29.98. The direct cash transfer to customers will be ~63.91.